Paradigm lost: the demise of "weak China".

• Author: Lampton, David M.

IN THE heady days of the 1990s, "globalization" was a phenomenon requiring "others" to marketize and eventually democratize. Unfortunately, less time was spent considering how globalization, and China's multi-dimensional entry into the world system, would require change in America itself. This oversight contributed to two problems. Internationally, it turned the United States into a global nanny, telling others how they ought to proceed in making the domestic adjustments globalization seemingly required of them, without paying due attention to the implications for ourselves. Domestically, Americans became complacent about maintaining and enhancing the infrastructure of our own national competitiveness, particularly human capital.

Because of its size, rate of change, unanticipated success and political coloration, China has become the poster child for those aspects of globalization that threaten the United States. For his part, President Bush has a balanced view and is seeking to keep relations on an even keel. In his May 31 press conference, he noted that "the relationship with China is a very complex relationship, and Americans ought to view it as such." But increasingly, as seen in the reaction to the attempted takeover of Unocal by the Chinese National Offshore Oil Corporation, more Americans are beginning to view China in ominous terms. We have witnessed a marked paradigm shift in thinking about China in the last few years, one that threatens to substitute one flawed framework (a "weak China") with another (a "China on steroids"). An April public opinion poll conducted by the Canada Institute of the Woodrow Wilson International Center found that 31 percent of Americans polled agreed with the statement, "China will soon dominate the world."

These perceptions, often exaggerated, have led many Americans, some members of Congress and the top echelons of the Defense Department--all ignorant of the severe problems China faces--in the directions of economic defensiveness and external stridency. In Congress, legislation reminiscent of the Smoot-Hawley Tariff Act of 1930 is given at least superficial consideration. The Bush Administration has unilaterally imposed restraints on Chinese textile imports. Congress reacted negatively to the now withdrawn bid for Unocal. And the national security bureaucracies advance "China threat" analyses. Director of Central Intelligence Porter Goss and Defense Secretary Donald Rumsfeld issued notable warnings in the first half of 2005, though the July Pentagon report on The Military Power of the People's Republic of China was surprisingly measured.

All this gives rise to four questions. To start, why and how has the dominant paradigm about China changed in the last few years? Second, what debate has this shift unleashed in U.S. policy and academic circles? Third, in what respect is China a competitor to the United States and others? And finally, what should the United States and China do to make that competition as constructive as possible?

Paradigm Shift

THE CONTOURS of the "weak-China paradigm" (China as a weak, developing, politically fragile and transitional economy) were established in contemporary America's first glimpses of China in the final stages of the Cultural Revolution, when President Richard Nixon went there in 1972. At that point, China had only a shade greater share of global GDP than France, a nation with only about 6 percent of China's population. There was virtually no private sector in the Chinese economy. The face of leadership in China was an infirm, eighty-plus-year-old Mao Zedong. China was widely understood in terms similar to those in which we now understand North Korea.

After Mao's death in September 1976, Deng Xiaoping's assumption of power, and the launching of the reform and open policy shortly thereafter, it took time both for the new policies to take root and for the rest of the world even to begin to conceive of China in terms of strength. After all, in 1978, China still accounted for only 0.8 percent of world trade. And China's progress was eclipsed in the world's eyes when East European communist regimes fell, followed by China's suppression of demonstrators in Beijing and elsewhere in 1989, and finally by the implosion of the USSR itself in 1991.

The core reason for viewing China as weak lay in the correct assessment that the country had an enormous institution-building effort ahead (constructing legal, market and regulatory institutions, and cultivating human and social capital). Even a cursory look at incentives and industrial work ethics indicated how far China had to go in the 1970s and 1980s to be competitive. It seemed self-evident that changing all this would take a long time, even without considering the disabilities of the one-party state (corruption) and the natural-resource, environmental and population constraints. All of this argued for reserved predictions about China's progress. Indeed, many of these drags on progress remain, and even today social stability is not to be taken for granted, as recent rather large, albeit isolated, disturbances indicate. In July, for example, a Shanghai suburb exploded into riots over environmental problems, industrial conditions and official indifference.

It is hard to say when the paradigm shifted toward that of a strong China (a modernizing, highly competitive, rising power). Perhaps it was China's intervention in the Asian financial crisis in 1997-98, when Beijing initially acted more boldly than Washington to help shore up liquidity in Thailand and Indonesia through the International Monetary Fund (IMF). Perhaps it was when Premier Zhu Rongji proposed, from 2000 to 2002, a free trade area for China and the Association of Southeast Asian Nations and then a timetable for its realization. Perhaps it was in 2002, when China became the number-one export market for both Taiwan and South Korea, supplanting the United States. Perhaps it has been the steady double-digit increase of Beijing's military budget since 1990 and its...